This Dog Was Fixed

continued  Petco's strategy of not revealing the bidding war was not in the spirit of full and timely disclosure. If the bidding battle had become news earlier, some other potential buyers might have surfaced. Shareholders might have received a better deal. The suit alleges that the Petco board and its financial backers violated their fiduciary duties by failing to engage in a process that would maximize shareholder value.

But was Petco brass worried about its shareholders? Ha! If it had cared about them, would it have snubbed the much higher bid? As the lawsuit states, a major reason for Petco's taking the lower bid is that PetSmart refused to say that Petco management, particularly chairman Brian K. Devine and chief executive James M. Myers, would keep their jobs after the acquisition.

And why would PetSmart want to keep Petco's top management? PetSmart's recent earnings have been growing steadily, both quarterly and yearly. That can't be said for Petco. Long-term debt is just 27.2 percent of PetSmart's total capitalization. It's 38.4 percent of Petco's. PetSmart's sales are running at $3.6 billion a year. Petco's are $2.1 billion. Standard and Poor's says PetSmart's sales will grow 12 to 13 percent this year. Petco's will go up 10 percent.

Yet, under the Green/Texas Pacific buyout, Devine can continue on for three years at current remuneration levels. In 2004, he raked in more than $4 million, and that pay level continues, according to the suit. After his employment terminates, he will begin a 20-year consulting contract that will pay him 25 percent of his last year's salary for the first 10 years, and 50 percent of that final year's pay for the last 10 years. He is 64 years old. Seventeen Petco directors and executives get cash payments of a collective $16.6 million.

Sweet, huh? That's why Robbins calls it a sweetheart deal -- self-dealing, breach of fiduciary duty, unjust enrichment at the expense of the shareholders. That's putting it mildly. Requests for comment to three separate Petco officials went unanswered.